UK sugar tax: Will soft drinks companies sue the government?

By Rachel Arthur contact

- Last updated on GMT

What actions could the industry take following the announcement of a UK sugar tax? Pic: iStock/lisaaMC
What actions could the industry take following the announcement of a UK sugar tax? Pic: iStock/lisaaMC
Reports over the weekend suggest that soft drinks companies are ‘poised to sue the government’ over the newly announced sugar tax in the UK.

The levy on sugar-sweetened beverages​ was announced last week, and is set to come into effect in April 2018.

But the soft drinks industry is preparing to sue the government over the sugar tax, according to the Sunday Times, while the British Soft Drinks Association (BSDA) says that nothing has been ruled out.

Coca-Cola: ‘We need to know more’

BeverageDaily asked the BSDA what actions the industry could take and the possibility of legal action.

Gavin Partington, BSDA Director General, said: "At this stage all options are on the table. We need clarification about how this tax is going to work, exactly what's excluded and what's not.

“Nothing can be ruled out at this stage."

A Coca-Cola spokesperson also emphasized the need to ascertain the details of the tax. “We need to know more about the levy and how the government plans to implement it,” ​they said.

“Once this is clear to us, we will decide on what steps to take as a business; and how best to continue the work we have done to help people consume less sugar and calories from our drinks.”

The soft drinks levy will be paid by producers and importers of soft drinks that contain added sugar, charged on volumes according to total sugar content, at up to 24p per litre ($0.34). The government says it expects the charged to be passed entirely onto the price paid by consumers.

A standard 330ml can could expect to see a tax of 6p ($0.09) or 8p ($0.12), depending on which band of the levy it falls into. Big brands including Coca-Cola, PepsiCo, Red Bull, Irn-Bru and Lucozade can all expect to be hit by the tax.

The government says the aim of the levy is to encourage companies to reformulate, with childhood obesity at the heart of the tax.

Legal action

The levy on sugar-sweetened beverages has been slammed by the industry,​ which says soft drinks have been singled out despite the efforts it has already made to reduce calories. The tax applies only to soft drinks, with an exemption for fruit juice and milkshakes, and does not cover other food and beverage categories such as confectionery.

Reports speculate that soft drinks manufacturers could consider suing the government via the European courts on the basis that other beverages with similar sugar content are excluded.

Similar challenges have successfully been carried out in other countries. In September last year the Finnish government announced it would scrap its tax on sweets and ice cream,​ after the European Commission said the tax unfairly advantaged producers within the country.

In December, the European Court ruled that Scotland’s intention to impose a minimum price for alcohol was in breach of free-trade laws.

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